The past is a failed model

“As in the past, privilege and power do not willingly submit to popular control or market discipline, and therefore seek to undermine meaningful democracy and to bend market principles to their needs.” Noam Chomsky in World Orders Old and New, 3/10

Nations are supposed to be homogenous and egalitarian, all citizens having the same rights and duties. In practice they are divided by class, religion, origins and quite frequently by language. This is because nation states are artificial constructions. Their borders, finalised in the 19^th and 20^th centuries, are the result of conquest, dynastic marriages, cash payments and colonial invasions, and their populations are conglomerates of more or less forced immigrations and loss of sovereignty. The nation’s real function is to define the limits of the domains and prerogatives of its ruling class, even if those class interests are often transnational. Nationalism comes to the fore when the class divide is so extreme that rulers and ruled no longer have anything in common. Then populists and demagogues propagate the idea of a past nation that has lost its way. They promise to restore a previous primacy, by going back to a mythical past and negating the present. This is pure buffoonery because time only moves forward, but those who want to believe it are numerous enough to give it credence. Political discourse becomes a blame game, and the nation’s enemies are abroad and at home.

Capital aspires to be global, but it remains in private hands. And that private property depends on the power of states for its protection. As capital expands its dominion and concentrates its ownership the necessity of armed force increases. At the same time, this use of public force for private interests becomes more apparent and provokes resentment, which must be diverted. The forces stationed abroad are not there to subjugate the weak and insure corporate plunder. They are deployed to protect the homeland from foreign attack. The forces at home are not for mass surveillance, repression and control of labour to benefit the few. They are needed to protect all citizens from criminal elements. However, when the threat of an attack by Afghanistan or Mali is finally perceived as ludicrous, a more consequential enemy must be constructed. And when criminals are those who prefer hemp resin to fermented malt, along with protest marchers, something more dangerous must be invented. So China and Russia are built up as credible menaces, while drug barons and anarchists are said to roam the streets.

Capital’s reliance on accumulating debts to realise its profits means it is periodically confronted by mountains of debt and subprime lending. Debts can be diluted away by inflation. But inflation pushes up interest and provokes labour unrest over wages. It can get out of control or bring economic stagnation. In the distant past, when things were far simpler, debts have been absolved. But today’s complexities make that hard to imagine. Mass defaults can also occur, but that threatens by contagion the whole financial structure with a freeze up of lending and exchanges. A dozen years ago that was beginning to happen when central banks came to the rescue, by buying up debts with seemingly unlimited amounts of monetary creation. Because of historic abuses central banks cannot lend money to governments, so the spending spree occurred on the market. And the market bidding pushed up the prices of Treasury bonds and brought down their rates of interest below the rate of inflation, and even into a new dimension of negative rates where the lender pays the borrower. This had repercussions for pension funds that rely largely on the regular incomes of interest, and for banks that are obliged to acquire public debt. But these low Treasury rates also lowered rates elsewhere. Corporations did some heavy borrowing to cover their losses or buy back their shares, and mortgages were cheaper thereby increasing demand and raising the cost of housing. Meanwhile current account overdrafts remained usurious.

Quantitative easing was about reducing the amount of public debt held by commercial banks. It allowed them to sell their Treasury bonds for newly minted cash at prices way above their face value, which meant getting some/most of the interest paid in advance (1). They could start lending again and did so more than ever. However, there was some unease about the process and its final outcome. Then came the pandemic lockdown and swaths of “helicopter money” were thrown to companies (mostly) and households (leftovers). This is government overspending on a huge scale, 10% to 20% of GDP. So government debts have grown by the same amounts, and central banks are buying them second hand from commercial banks that do the primary lending. In effect, central banks are creating money to finance government spending. This could provoke a long awaited inflationary cycle and reduce the proportion of debt to income for everyone. But inflation is chaotic. Some gain and others lose, wages are always behind the curve, production stagnates and lending dries up.

When capital is in trouble it calls on governments for assistance. That means falling back on its national base. It means boosting nationalism to justify its demands. Since the Great Depression capital has been struggling to take off again, weighed down by too much accumulated debts. The pandemic lockdown presents a more serious problem. In 2008 lending was drying up. Now it is incomes that are not being earned. Back then demand failed from lack of credit. Today demand is failing from lack of incomes. And all those who have lost their earnings will soon default on their debts. Capital will need even more help from governments and will have to present it as a national emergency, and the blame will be on others, foreign nations and foreigners in general.

Capital expands to the limits of debt and, when the credit structures start to fall apart, it retreats to the safety of its national borders. The financial crisis in 2008 saw global banks huddling in their homelands and begging for national bailouts. Now multinational corporations are doing the same, downsizing goes back to the roots, and the breakdown of air and sea travel plus the slowdown of trade have strengthened the impression of being besieged. The contraction of capital that is just beginning will propagate a nationalist ideology, as only that can justify the financial support it receives from respective governments. It is said that capitalism and its fundamental defects cannot be contested as that leads to totalitarian socialism, so the fault must lie elsewhere. As the situation deteriorates, culprits will have to be found, popular anger will be canalised by the media and aimed at certain targets, at all those who do not fit the mould. Though it has provoked some catastrophic wars, this method has been successful in the past. It may not be so any more. Capital and its lackeys in governments and media have lost much of their credibility, as wealth and power are seen to concentrate in fewer and fewer not very capable hands.

Capital’s dependence on debts and plunder to realise its private profits is not sustainable and condemns it to failure. But the system is so complex and interwoven that it cannot be modified or reformed. And the fundamental dogma of private property and profit is so pervasive that it cannot be contested. Private property has always been theft, and Robber Barons in 11^th century Britain were neither the first nor the last to practise it, just as Proudhon was not the first to proclaim it as such. But the original and ongoing thievery is masked by inheritance, buying and selling, and by a seemingly unconditional quest for profits. And vast numbers have consented to the crime and possess a part of the stolen goods. Home ownership is the strongest incentive for political conservatism, and makes all owners accomplices of the robbery. “You can fool some of the people all the time” and that is enough if they have the guns.

Nations mark the boundaries of private property backed by central government and armed force. Empires extend these limits to encompass vassal nations. But the conquest can only succeed if the natives disappear or are totally assimilated. Either one nation is annihilated or the two are able to merge. If neither happens, the conquering nation is condemned to perpetual military occupation. Empire means subjugation. It contradicts the republic and the model of nationhood. Empire brings plunder, but it also has a cost. A few have the benefits, but the whole nation pays the price. And if resistance is strong and enduring, that price is high. It is a tax on labour in lives and wealth. As empire denies the commonwealth of other nations, so it does its own. It replicates its foreign practices at home. Absurd wealth and desperate poverty propped up by military, paramilitary and police is the imperium’s standard model for vassal states, and it ends up ruling the heart of empire. World dominion is based on armed force whereas commonwealth is based on consent. Empire and republic contradict one another. A republic can call up the nation to ward off an external or internal threat, real or imaginary, because it represents the nation. An empire must repress nationalism as it opposes imperial dominion. Empire denies the national identities of its subjects and dilutes its own to include all those who flock to its shores, more or less freely, from all its far flung domains. There is no national solidarity for the empire to call on.

Nationalism and xenophobia are on the rise, encouraged by the self-interest of demagogues and the self-interest of wealth. But they may have reached the limits of their appeal. The very notion of nationalism must seem increasingly futile, when the most obvious menaces are global. The pandemic, financial chaos and climate disruption are far more likely to make life difficult than Russia, China or skin pigmentation. And neither can be resolved nationally. Nationalism denies them as they oppose its agenda. But events are proving that those denials are lies. Empires crush nations. And when empires fall – as they all do when early gains give way to rising costs – there is a revival of nationalism. Today’s failing empire is universal, and nations around the world are trying to remember who they were. This looking back is futile, but it avoids looking forward into the darkness of looming catastrophes. The empire will tumble along with global finance. Trade will come to a standstill, while travel has already been localised by the pandemic and closed borders. Weather conditions will get more extreme, with increasingly destructive winds, droughts, floods and wildfires. And budding nationalism will be confronted by the reality of worldwide dependency. World Empire has brought about an unprecedented interconnection of all with all. Finance, production, communications, trade and tourism are global. Not even North Korea is completely outside the system. And the pandemic has globalised health, while closing borders and severely restricting travel. This could be the preliminary stage of a nationalist withdrawal, or it could be a final pathetic attempt at denying humanity’s unity on a one and only shared planet. Empire institutes unequal rights and duties and imposes conformity, world elites and world labour. This needs to be reversed into equal rights and duties and individual uniqueness.

1. When the price of bonds goes up, it is as though part of the future interest is being paid in advance to the seller. The buyer must reduce that extra cost from the future interest received, hence a fall in the effective rate of interest.